UPDATE: EDF CFO Expects UK Asset Sale To Close In November

French state-controlled power behemoth Electricite de France SA (EDF.FR) expects to finalize the sale of its U.K.-based power grids by November, Chief Financial Officer Thomas Piquemal said Thursday in an interview with Dow Jones Newswires just hours after shareholders for a Hong Kong-based member of the buying consortium approved the deal.

The transaction remains subject to approval by decree of the French finance ministry, as well as European Union antitrust authorization, Piquemal stressed.

A Cheung Kong Infrastructure Holdings Ltd.-led consortium, which includes Cheung Kong Infrastructure Holdings Ltd. (1038.HK), HongKong Electric Holdings Ltd. (0006.HK) and Hong Kong tycoon Li Ka-shing's foundation, has offered EDF GBP5.8 billion for EDF's U.K. electricity distribution networks. Shareholders of China's Hongkong Electric Holdings Ltd. (0006.HK), part of the buying consortium, approved the transaction during a general meeting Thursday, Piquemal said.

If the deal is expected to cut the group's debt, estimated at around EUR45 billion at the end June, by EUR6.8 billion, the true objective "is to respect our commitment towards our equity and bond investors to sell around EUR5 billion worth of assets," Piquemal said.

The company's CFO has no specific debt objective, he said, though he understands the need for shareholders and investors to have a better picture of the group's prospects. To address such a concern and give "more visibility on the company," Piquemal said he was considering disclosing three-year financial objectives when the group releases its 2010 full-year earnings in early 2011, depending on the outcome of pending French electricity market reform.

The bill, which the French Parliament started to discuss at the start of summer, was drafted by the French government under European Commission pressure to address competition issues. It is expected to force EDF, France's sole nuclear power producer, to sell around one quarter of its nuclear-generated power at cost to competitors during a short period, allowing the competitors to develop their own production means.

EDF has argued that the cost for its nuclear-generated power is around EUR42 per megawatt hour, while competitors consider such a price too high and would rather pay EUR35/MWh. This price is sometimes called the "NOME price," an acronym for the proposed law, the Nouvelle Organisation des Marches de l'Electricite.

Piquemal stressed that a NOME price below EUR42/MWh "would be very negative" for the company, while at EUR42/MWh, the impact would be neutral on EDF's accounts, as it would take into account special industrial tariffs under a program that allows companies which opted for liberalized power rates to go back to lower, regulated prices.

As for EDF's investments in the U.S., Piquemal noted that the EUR1.1 billion provision the company booked was due to the deterioration of the economic environment and power and natural gas prices there since EDF acquired half of Constellation Energy Group Inc.'s (CEG) nuclear assets.

The deal came with a put option worth $2 billion that Constellation can exercise anytime until Dec. 31, yet Piquemal cautioned that "Constellation must weigh between a potential immediate profit and the value of its partnership with EDF."

The group is currently conducting studies to build a third-generation nuclear reactor at Calvert Cliffs, Md., but the effort needs a boost from the U.S. Department of Energy. An unfavorable sign from the U.S. department would call EDF's investment rationale there into question, Piquemal said.

"Our will is to consolidate our assets abroad, including in Italy," Piquemal also said. EDF's Italian partner, A2A SpA (A2A.MI), recently said it was open to considering all options over their joint control of Edison SpA.

Over the past year, A2A has been vocal in criticizing the joint control of Italian electricity and natural gas company Edison. A2A and EDF are locked in a shareholders pact over Edison until September 2011 and can decide not to renew the pact six months before that date.

EDF, which owns 2.5% of French state-controlled nuclear engineering firm Areva (CEI.FR), will launch soon a study of increasing its stake in Areva, as mentioned recently by the French government, Piquemal said. He declined to say whether such a move would make sense financially for EDF.

Piquemal also hopes to set aside as soon as possible half of its French grid unit Reseau de Transport d'Electricite, or RTE, into a special fund established by law to help guarantee the full financing of the dismantlement and replacement of old French nuclear reactors in 10 year's time.

The move, announced in July, has been branded as very innovative by investors and analysts, as it allows EDF to allow to keep cash for other needs, such as paying down debt.

Then, EDF would be able to deconsolidate RTE from its accounts, though this is not the primary objective of such a plan, and EDF would no longer bear RTE's EUR6.5 billion debt on its accounts, Piquemal also said.

The group still plans to bring its nuclear production capacities availability rate--a much sought-after indicator for investors known as "kd"--to 78.5%-79.5% by the end of the year. Piquemal noted that the rate fell to around 75% last year due to strikes, causing reactor maintenance delays, but it has actually increased in recent months. The group still plans to increase it to 85% by 2015, as pledged by Chairman and Chief Executive Henri Proglio when he took office nearly a year earlier.